The Moneychanger
Weekly Commentary
Friday, 11 July a.d. 2014 Browse the commentary archive
Here's the weekly scorecard:
  3-Jul-14 11-Jul-14 Change % Change
Silver, cents/oz. 2,108.90 2,141.10 32.20 1.5
Gold, dollars/oz. 1,320.40 1,337.00 16.60 1.3
Gold/silver ratio 62.611 62.445 -0.166 -0.3
Silver/gold ratio 0.0160 0.0160 0.0000 0.3
Dow in Gold Dollars (DIG$) 267.22 261.97 -5.24 -2.0
Dow in gold ounces 12.93 12.67 -0.25 -2.0
Dow in Silver ounces 809.34 791.36 -17.98 -2.2
Dow Industrials 17,068.26 16,943.81 -124.45 -0.7
S&P500 1,985.44 1,967.57 -17.87 -0.9
US dollar index 80.27 80.22 -0.05 -0.1
Platinum 1,506.10 1,512.30 6.20 0.4
Palladium 862.30 874.75 12.45 1.4

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'Twas not a grand week for stocks. Dow made a new all-time high and crossed 17,000, but ended the week 124.45 (0.7%) lower. On the weekly chart that is technically the first half of a key reversal (break to new high with lower close). A lower close next week would complete that signal. S&P500 is in similar shape, but stocks compose a huge market, & can take a long time to roll over. Be sure a peak is drawing nigher.

Today the Dow bounced back 28.74 (0.17%) to 16,943.81. S&P500 gained 2.89 (0.15%) to 1,967.57. Stocks are still hovering around their 20 day moving average, tripwire of a decline, and above crucial support.

More apt to our purposes is the Dow's performance against metals. This week both the Dow in Gold and Dow in Silver resumed their plunges begun in early June. For the week the Dow in Gold lost G$5.24 gold dollars (0.25 troy ounce, 2.2%) to G$261.97 (12.673 oz). Dow in silver lost S$23.25 silver dollars (17.98 oz or 2.2%) to end at S$1,023.17 (791.36 oz). Dow in silver punched through its 200 DMA (now S$1,030.15 or 796.76 oz). Dow in gold is creeping toward its 200 DMA, now G$260.05 (12.58 oz). So oversold is the Dow in Silver that it gives me the great leaping fantods, but you can't argue with a trend in force.

US dollar index closed down only 5 basis points on the week at 80.22. Looking at that you wouldn't see the 58 point range from last Friday, or the dollar's crummy performance this week. A possible upside down head and shoulders stands on the dollar chart, but the Samolean ain't going nowhere till it closes above 80.40. All else is white noise. Down in the nether regions, the dollar must hold 80 or tumble.

The Frankencurrency gained 0.01% today, nothing, nothing. Ended at $1.3609, still clinging to its perch above $1.3600, but if it falls off that perch, it'll be "dead birdie."

Yen gapped up yesterday to the top of that longstanding narrow even-sided triangle, then acted timid today and barely fogged a mirror. Closed up 0.03% to 98.72.

Ten year treasury yield has dropped this week to 2.520%, largely because bonds along with the dollar picked up a safe-haven bid when the bad news broke about the Portuguese Espirito Santo bank. Some of the spirits at that bank may not have been exactly "santo", & that raised phantoms of banks stacked like dominoes and crackling against each other.

Gold profited from those banking fears as well, not only in price terms but in terms of its value against the Philadelphia Bank Index (BKX). The Gold/BKX spread, which rising displays confidence in the financial market falling, has climbed to its 200 DMA and appears determined to break through.

Gold today scraped $1.70 off its feet to $1,337.00 while silver counted out 4.8 cents to 2141.1c. Big jumps this week encourage traders to take profits & close positions before the weekend, and that probably explains today's crawfishing. Next week they'll rise again.

But look where gold stands. ABOVE its downtrend line from October 2012, above its 300 day moving average, in an unbroken rally from 1 June, targeting roughly $1,400. It's becoming overbought, but so what? Overbought can last longer than the smart fellows shorting the overbought market.

On the weekly chart gold stands above its 20 and 50 week moving averages. Above the downtrend line from August 2011. Yes, it's below the 200 WMA, but that double bottom in June 2013 and December 2013 have stood firm these six months. Gold is rallying. Bottom of the 2011-2013 correction lies in the past, not up ahead.

Can I find anything good to say about silver? Is a pig's little rear pork? Burst through the downtrend line from the August 2013 high, and is nearing the downtrend line from the April 2011 high, now about 2230c. Above all its moving averages and ready to cross above the 300 day, now at 2176c. Hard work and enemies lie in wait at 2218c, the February high, and the April 2011 downtrend line. Silver is presently massively overbought and has been since it broke above 1975c, but overbought can get overboughter. Both silver & gold appear to be making that one last leg of the rallies that began 1 June.

I emphasize that gains from safe-haven bids, such as gold and silver caught on bank collapse fears in Europe, UNLESS a bull market is carrying them. But bear in mind that when they reach $1,370 - $1,400 and 2225c, silver and gold will be vulnerable to a correction where they will give back much of those fear gains -- UNLESS of course the banks really do act like dominoes.

Say, wouldn't that be a long term reason to buy gold anyway?

This week the high premium on US 90% silver coin which began rising in 2013 and reached $5.00/oz at wholesale spring a year ago, dropped back to finally to 45c/oz. That makes the US 90% coin, which I prefer anyway for its divisibility, recognition, and liquidity, a better buy that one ounce silver rounds by 15c/oz.

On 11 July 1864 Confederate General Jubal Early began an invasion of Washington, DC. Unfortunately, he didn't finish the job so we're still plagued with 'em today.

On 11 July 1804 the First Secretary of the US treasury, Alexander Hamilton, was killed by Vice President Aaron Burr in a duel. To get a flavor of what this would mean today, imagine Joe Biden and Little Timmy Geithner in a face-off duel. WHOOPS! Mustn't duelers must first be men of honor? Burr had been aggrieved by Hamilton's defamation of his character during the 1804 New York race for governor. While the duel ended Hamilton's career permanently in death, Burr's political career was pretty well shot, too.

I know folks today think the Code Duello barbaric, but think a minute. It certainly would encourage good manners and reduce lawsuits.

Y'all enjoy your weekend!

Argentum et aurum comparanda sunt —
Silver and gold must be bought.

— Franklin Sanders, The Moneychanger

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Market Snapshot See more charts and market data
11-Jul-14 Price Change % Change
Gold, $/oz 1,337.00 -1.70 -0.1
Silver, $/oz 21.41 -0.05 -0.2
Gold/Silver Ratio 62.445 -0.078 -0.1
Silver/Gold Ratio 0.0160 -0.0000 -0.2
Platinum 1,513.60 -3.70 -0.2
Palladium 873.70 1.70 0.2
S&P 500 1,967.57 2.89 0.1
Dow 16,943.81 28.74 0.2
Dow in GOLD $s 261.97 0.80 0.3
Dow in GOLD oz 12.67 0.04 0.3
Dow in SILVER oz 791.36 3.11 0.4
US Dollar Index 80.22 0.06 0.1
IMPORTANT NOTE: The following are wholesale, not retail, prices. To figure our retail selling price, multiply the "ask" price by 1.035. To figure our retail buying price, multiple the "bid" price by 0.97. Lower commissions apply to larger orders, higher commissions to very small orders.
SPOT GOLD: 1,338.70      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,373.51 1,385.55 1,385.55
1/2 AE 0.50 682.23 706.16 1,412.33
1/4 AE 0.25 356.16 359.78 1,439.10
1/10 AE 0.10 141.80 147.26 1,472.57
Aust. 100 corona 0.98 1,301.70 1,310.70 1,337.17
British sovereign 0.24 317.02 329.02 1,397.71
French 20 franc 0.19 251.81 254.74 1,364.41
Krugerrand 1.00 1,353.43 1,363.43 1,363.43
Maple Leaf 1.00 1,353.70 1,368.70 1,368.70
1/2 Maple Leaf 0.50 769.75 702.82 1,405.64
1/4 Maple Leaf 0.25 341.37 358.10 1,432.41
1/10 Maple Leaf 0.10 141.90 145.92 1,459.18
Mexican 50 peso 1.21 1,604.25 1,615.25 1,339.68
.9999 bar 1.00 1,343.39 1,354.70 1,354.70
SPOT SILVER: 21.45      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 25.00 26.50 34.64
VG+ Peace dollar 0.77 22.00 24.25 31.70
90% silver coin bags 0.72 15,404.68 15,654.68 21.89
US 40% silver 1/2s 0.30 6,134.53 6,284.53 21.30
100 oz .999 bar 100.00 2,134.50 2,194.50 21.95
10 oz .999 bar 10.00 219.45 220.45 22.05
1 oz .999 round 1.00 21.55 22.05 22.05
Am Eagle, 200 oz Min 1.00 23.20 24.45 24.45
SPOT PLATINUM: 1,513.60      
Platinum Platypus 1.00 1,538.60 1,578.60 1,578.60
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© 2015 Little Mountain Corporation, d.b.a. The Moneychanger. All rights reserved. May not be republished in any form, including electronically, without our express permission.

Warnings and Disclaimers

To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary trend is up, targeting 16:1 gold/silver ratio or $195.66; stock's primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 16 ounces of silver. US$ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.

Be advised and warned:

  • Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short-term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.
  • NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.
  • NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.
  • NOR do I recommend buying gold and silver on margin or with debt.
  • What DO I recommend? Physical gold and silver coins and bars in your own hands. For additional information, please see our Ten Commandments for Buying Gold and Silver.
  • One final warning: NEVER insert a 747 Jumbo Jet up your nose.

Explanation of Terms

The US DOLLAR INDEX is the average exchange rate for the US dollar against the Euro, Yen, Pound sterling, Canadian Dollar, Swiss Franc, and Swedish Krona, weighted for each country's trade with the US. It gives a general measure of the US dollar's performance against all other currencies.

The DOW IN GOLD DOLLARS measures the Dow Jones Industrial Average in gold dollars (0.048375 troy oz. by law). The DiG$ depicts the Primary (20 year) Trend of stocks against gold. When the DiG$ is dropping, gold is gaining value against stocks in a trend that should last 15-20 years. The DiG$'s chart is identical to the Dow in ounces of gold, but gives us one unvarying measure all the way back to 1896. Because it shows the primary trend ("tide") of gold against stocks, for investors it is the single most important financial chart in the world today. Since its August 1999 high at G$925.42 (44.8 ounces), the DiG$ has trended down, targeting a G$80-G$20 (4-1 oz. of gold will buy the whole Dow).

The DOW IN SILVER OUNCES shows how many ounces of silver are needed to buy the entire Dow. The DiSoz is trending down with a target of under 36 ounces.

The GOLD/SILVER RATIO is the gold price divided by the silver price, and shows how many ounces of silver it takes to buy one ounce of gold. The Ratio shows us the Primary (20 year) Trend of gold's value against silver. When the Ratio's trend is dropping, silver is gaining value against gold. This trend targets a gold/silver ratio of 16 ounces of silver to one of gold within the next 5-10 years. That implies that silver will massively, vastly outperform gold before this bull market ends. When both metals are rallying, the ratio often (but not always) drops, confirming the rally.

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